Gold occupies a good place in portfolios since, in times of crisis, its safe-haven status is reassuring. But investing in gold is not limited to physical possession of the metal: there are other forms as well. Here we discuss what you need to know about it.
The precious metal continues to seduce investors gold ira. In 2019, the price of an ounce rose by 17.5%. The trend has spread further at the beginning of the year, as uncertainties regarding the effects of the coronavirus-related crisis weigh on markets. It is now that it is fully playing its role as a shelter value.
The yellow metal figures well in the strategy of many savers. On the other hand, most specialists recommend investing between 5 and 10% of our financial assets in it. Obviously, when it is purchased in its physical form, it must be stored in a safe place, which is an expense for its owners, since it is necessary to rent a safe at the bank, or hire the services of a specialized company. As far as taxation is concerned, gold in Spain is taxed like any other financial asset, i.e. it is taxed at the tax rate applicable to capital gains, as in the sale of a share or a fund.
A tangible and countercyclical asset
But these two drawbacks of physical gold are offset by several significant advantages:
Gold is countercyclical
As soon as there are major turbulences in the markets (especially downwards) or during periods of great volatility, its price rises. In September 2008, in the week following the Lehman Brothers bank failure, it was up 18%!
Gold is a tangible asset
In times of crisis, many investors cling to the possibility of owning something other than securities, since the latter can quickly lose much of their value.
Gold returns zero, but not negative
Until now, many investors despised gold because it represented the archetype of the dormant investment: keeping it in a safe does not bring any profit! Now that 10-year government bonds offer negative yields, things change. Currently, the fact of investing in these bonds no longer contributes anything to the saver, since their cost is equal to their benefits. In this context, it is preferable to resort to gold, which will not bring any benefit, but it does not have a cost either.
There are other forms of investment
In case of physical possession, it is better to avoid bullion, which weighs a kilo, currently costs more than 45,000 euros and is sometimes difficult to resell. Raw pieces and ingots (between 5 and 100 grams, for example) will find a buyer more easily.
There are also other ways to invest in gold. ETFs (exchange traded funds) are investment funds traded on the stock exchange that exactly reproduce the price of gold. Advantage they present: with them it is not necessary to physically possess gold. Some entities that distribute them link these ETFs to physical gold reserves kept in their safes; others don’t. It is better to opt for the first category. It is also better to opt for ETFs denominated in euros so as not to be exposed to exchange rate risk.
Gold stocks are another investment option. These companies thrive when the price of gold rises, and the industry is in full consolidation, leaving additional room for price increases. In addition, these companies distribute dividends. You can invest directly in the shares of mining companies, or choose a fund that is responsible for selecting the values.
In conclusion
As the safe haven par excellence, gold rises in periods of uncertainty. Even if it does not bring any profit, it also does not cause investors to lose money unlike bonds, which currently have negative rates. Physical gold is not the only way to invest: savers can also opt for ETFs or specialized funds.